Make a Pension Contribution Before April 2023

We repeat, tax relief has always been an incentive to save in pensions.  The incentives are huge.

Tax Relief depends upon the amount of income tax you pay.  You can only get tax relief based upon the amount of income tax you pay e.g., you cannot get 40% tax relief if you are a 20% taxpayer, you are entitled to 20% tax relief.

How is Tax Relief Paid?

• If you make a pension contribution to a private pension scheme, you pay a net contribution, and 20% tax relief is automatically added to your pension fund by your pension provider.  If you are a higher rate or additional rate taxpayer, 20% tax relief is added to your pension fund as normal and the balance of your tax relief due e.g., 20% or 25% is paid to you as a tax refund when you complete your tax return.
• If you make a pension contribution to your workplace pension or occupational pension, this is usually deducted from your gross pay (before any income tax is calculated and deducted).  This means you pay less income tax on your earnings as your net taxable earnings are lower after the pension contribution has been deducted.  You receive your tax relief automatically at 20%, 40% or 45% as your pay is lower after the pension contribution and therefore lower tax is paid than would have been if you had not made a pension contribution.

If you are a non-taxpayer - You get 20% tax relief on pension contributions.

• If you make a pension contribution before 6^th April 2023, you get 20% tax relief on a maximum yearly pension contribution of £2,880 (net) which, with 20% tax relief of £720 (even though you pay no income taxes), making a maximum yearly gross pension contribution of £3,600.  If you pay any more in, you are not entitled to tax relief on the excess.

If you are a basic rate taxpayer - You get 20% tax relief on pension contributions. 

• If you pay in £80 (net) into your pension fund before 6^th April 2023, you get £20 tax relief added to your pension making it up to £100.  
• If you pay in £800 (net) into your pension fund before 6^th April 2023, you get £200 tax relief added to your pension making it up to £1,000.
• If you pay in £8,000 (net) into your pension fund before 6^th April 2023, you get £2,000 tax relief added to your pension making it up to £10,000.

If you are a higher rate taxpayer - You get 40% tax relief on pension contributions.

• If you pay in £80 (net) into your pension fund before 6^th April 2023, you get £20 tax relief added to your pension making it up to £100 and a further £20 tax refund via self assessment tax return.  
• If you pay in £800 (net) into your pension fund before 6^th April 2023, you get £200 tax relief added to your pension making it up to £1,000 and a further £200 tax refund via self assessment tax return.
• If you pay in £8,000 (net) into your pension fund before 6^th April 2023, you get £2,000 tax relief added to your pension making it up to £10,000 and a further £2,000 tax refund via self assessment tax return.

If you are an additional rate taxpayer - You get 45% tax relief on pension contributions.

• If you pay in £80 (net) into your pension fund before 6^th April 2023, you get £20 tax relief added to your pension making it up to £100 and a further £25 tax refund via self assessment tax return.  
• If you pay in £800 (net) into your pension fund before 6^th April 2023, you get £200 tax relief added to your pension making it up to £1,000 and a further £250 tax refund via self assessment tax return.
• If you pay in £8,000 (net) into your pension fund before 6^th April 2023, you get £2,000 tax relief added to your pension making it up to £10,000 and a further £2,500 tax refund via self assessment tax return.

Make sure you make pension contributions before the end of the tax year 5th April 2023 to maximise pension tax relief and grow your pensions.

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